PART IIIIncome Tax, Corporation Tax and Capital Gains Tax
CHAPTER IIICapital Gains
86Indexation allowance on certain disposals
1
This section applies to any disposal of an asset—
a
which occurs on or after 6th April 1982, or, if the disposal is by a company, on or after 1st April 1982 ; and
b
which occurs after the expiry of the period of twelve months beginning on the date on which the asset in question was acquired or provided (which period is in the following provisions of this Chapter referred to, in relation to a disposal, as " the qualifying period "); and
c
on which, disregarding the indexation allowance for which provision is made below, a gain would accrue (whether or not that gain would be wholly a chargeable gain).
2
In relation to a disposal to which this section applies—
a
" the gross gain " means the amount of the gain referred to in subsection (2)(c) above, computed in accordance with Chapter II of Part II of the Capital Gains Tax Act 1979 ; and
b
" relevant allowable expenditure " means, subject to subsection (3) below, any sum which, in the computation of the gross gain, was taken into account by virtue of paragraph (a) or paragraph (b) of subsection (1) of section 32 of that Act.
3
In determining what sum (if any) was taken into account as mentioned in subsection (2)(b) above, account shall be taken of any provision of any enactment which, for the purpose of the computation under the said Chapter II, increases, excludes or reduces the whole or any part of any item of expenditure falling within the said section 32 or provides for it to be written-down.
4
The following provisions of this Chapter have effect to provide for an allowance (in those provisions referred to as " the indexation allowance ") which, on a disposal to which this section applies, is to be allowed against the gross gain so as to give the gain for the purposes of the [1979 c. 14.] Capital Gains Tax Act 1979 or, if the indexation allowance equals or exceeds the gross gain, so as to extinguish it; and, accordingly, at the end of subsection (1) of section 28 of that Act (computation of gains accruing on the disposal of assets) there shall be added the words " and sections 86 and 87 of the Finance Act 1982 ".
5
Notwithstanding anything in section 29 of the Capital Gains Tax Act 1979 (losses to be computed in like manner as gains)—
a
this section does not apply to a disposal on which a loss accrues; and
b
in any case where, on a disposal to which this section does apply, the indexation allowance exceeds the gross gain, no loss shall result and, accordingly, the disposal shall be one on which, after taking account of the indexation allowance, neither a gain nor a loss accrues.
6
The provisions of Schedule 13 to this Act have effect for supplementing this section and the following provisions of this Chapter and the preceding provisions of this section have effect subject to the provisions of that Schedule.